Congratulations on Buying Your Home with Cash! I just wanted to make you aware that the IRS gives you a 90 day window to put a mortgage on your property and gain the tax benefits associated with the coveted “acquisition indebtedness” status. What is “Acquisition Indebtedness” and Why Does it Matter to Me? Any mortgage that is used to buy, build, or improve a home qualifies for “acquisition indebtedness” status. Any mortgage that is used for any other purpose is demoted to the “home equity indebtedness” status. If you don’t put a mortgage on your property within 90 days of the purchase closing date, any mortgage you put on the property in the future that is not used specifically for home improvements will be demoted to “home equity indebtedness” status. This means that: You will NOT be able to deduct ANY of the interest at all if you are subject to the Alternative Minimum Tax (AMT) You will only be able to deduct the interest on up to $100,000 of the mortgage balance if you are not subject to the AMT On the other hand, if you do put a mortgage on the property within 90 days and qualify for the special “acquisition indebtedness” status: You can use the funds for any purpose you want (including investment, starting a college fund for the kids or grandkids, retirement needs, etc.) You can deduct the interest on up to $1,000,000 of mortgage balance regardless of whether you are subject to AMT Is There a Deadline to Qualify for the Tax Benefit? Yes! You must put a mortgage on the property within 90 days of the purchase closing date in order to qualify for the special “acquisition indebtedness” status. What if I Wait Until After 90 Days? You will lose the special tax benefits associated with the “acquisition indebtedness” status. Any mortgage you put on the property in the future that is not used specifically for home improvements will be classified as “home equity indebtedness”.